TO: Prof.

Crosley
FROM: Van Ha, Operational Analyst
DATE: MAY 20
SUBJECT: Walt Disney and its ways of making dreams come true
Financial analysis shows that the Walt Disney can decrease its huge expenses by enhancing total quality
management program (TQM), and moving to the emerging and less costly markets. By doing so, the
company can reduce its operating expenses and increase its gross profits margin.
1. Company background
All our dreams can come true, if we have the courage to pursue them (Walt Disney) i
In October 1923, Disney joined his brother, Roy in California, to open Disney Brothers Studio.
Although the company coped with many failures, it made its turn around with the birth of Mickey
Mouse character in 1928. From a small animation studio, the Walt Disney Company has become the
largest globally diversified entertainment and media in the industry. Under the leadership of CEO
Robert Iger, Disney went through several important acquisitions, including Pixar (2006), Marvel (2009),
PlayDom (2010), and UTV (2011), which increased the companys reputation and presence in
international market. With its diverse portfolio, the company operates in five main segments: media
networks, resorts and parks, studio entertainment, consumer products, and interactive media. ii
2. Issue
The Walt Disney is facing problems with the high and increasing costs and expenses because its high
quality film productions, high budget on research and development, and high costs in operations and
constructions of parks and resorts.
3. Analysis
Both financial analysis and SWOT analysis show that high costs are one of Walt Disney Companys
biggest issues. In 2011, the companys gross margin was 19.3%iii, while its biggest competitors, NBC
Universal Broadcasting Inc. and Time Warner Cable Inc. had gross margins of 39.9%iv and 53.6%,
v
respectively.
According to ESTEL analysis, the Walt Disney Company is in a tough macro-environment. However,
the companys strategy passes the Fit test and contributes to the success and development of the
company. vi
4. Recommendations:
a. Moving Disney Land theme parks and resorts toward the emerging markets.
The Walt Disney Companys parks and resorts are successful in attracting visitors and guests by locating
in big and popular cities, including California, Florida, Tokyo, Hong Kong, and Shanghai. However, big
cities always come with high operational and maintenance costs. The company can do market research
to find out cheaper and emerging markets such as Brazil, or India. By doing so, it will succeed in
reducing costs and expenses while keeping its number of visitors. vii
b. Enhance total quality management program (TQM)
TQM is value-based management philosophy practiced by all departments and employees in the
company to create continuous improvements and total satisfaction for customers. With TQM, Walt
Disney can build its competitive advantages on exceptional customer services, productivity, and reduce
its costs. In the long run, the company will continuously enhance its services and products and keep its
leadership in the changing market without expenses. viiiix

TO: Prof. Crosley

FROM: Van Ha, Operational Analyst
DATE: MAY 20
SUBJECT: Walt Disney and its ways of making dreams come true

Howes, 2012
Thompson, Peteraf, Gamble, Strickland, 2013
iii
Appendix
iv
Nation Broadcasting Corp PLC: Key ratios
v
Time Warner Cable Inc: Key ratios
vi
Appendix
vii
Wasko, 2001
viii
Thompson et al., 2013
ix
Ingelsson, Pernilla, Maria Eriksson, and Johan Lilja. 2012
ii

TO: Prof. Crosley

FROM: Van Ha, Operational Analyst
DATE: MAY 20
SUBJECT: Walt Disney and its ways of making dreams come true
References
Howes, Lewis. "20 Lessons from Walt Disney on Entrepreneurship, Innovation and Chasing Your
Dreams." Forbes. Forbes Magazine, 17 July 2012. Web. 19 May 2014.
<http://www.forbes.com/sites/lewishowes/2012/07/17/20-business-quotes-and-lessons-fromwalt-disney/>.
Ingelsson, P., Eriksson, M., & Lilja, J. (2012). Can selecting the right values help TQM implementation?
A case study about organisational homogeneity at the Walt Disney Company. Total Quality
Management & Business Excellence, 23(1), 1-11. doi:10.1080/14783363.2011.637801
Morningstar. (n.d.). Time Warner Cable Inc: Key ratios. Retrieved May 19, 2014, from Morningstar
Investment Research database.
Morningstar. (n.d.). Nation Broadcasting Corp PLC: Key ratios. Retrieved May 19, 2014, from
Morningstar Investment Research database.
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A.J. (2013). Crafting and executing strategy: The
quest for competitive advantage: Concepts and cases. New York:McGraw Hill/ Irwin.
Wasko, J. (2001). The Magical-Market World of Disney. Monthly Review: An Independent Socialist
Magazine, 52(11), 56.

Appendix 1

TO: Prof. Crosley

FROM: Van Ha, Operational Analyst
DATE: MAY 20
SUBJECT: Walt Disney and its ways of making dreams come true
SWOT ANALYSIS

STRENGTHS

Have a diverse portfolio- spread risks

Good brand image and loyal customer
Good presence in global market
Good senior management team

WEAKNESS

OPPORTUNITIES

Growth in international market, especially

new emerging market: it acquired a media
India, Russia)
Increase online presence
The growth in Disney Music channel

High production, advertisement, operation

costs
Interactive Media division suffers loss
Companys name is highly associated with
children as the main target audience
The frequent changes in top managers
THREATS
Media Networks division: competitive for
viewers
Studio Entertainment: Decline in DVD
sales and rentals due to the changing in
consumers behavior.
Changing in consumer behaviors and
income.
Privacy of intellectual property and the
protections law/
Economic recession: Walt Disney product
is usually considered as luxury.
Economic recession can have negative
effects on its theme parks and resorts
division.

FIT TEST
Diversification has been one of the most focused strategies. It has been successful in acquiring important
firms including Pixar, and Marvel. With its big portfolio, the Walt Disney Company has bring its
characters to customers through other means of entertainment, including theme parks, resorts, consumer
products, media and studio entertainment. With the company good brand and loyalty, the Walt Disney
Company increases their market shares by entering potential markets, and using their characters to
attract customers. Its strategy fit both the external and internal conditions of the company. Moreover,
with its diverse portfolio, the company is successful in spreading out its risks. Also, by being divided
into small divisions, it is easier for the company to response to the changes in the market, and the shifts
of consumers behaviors.

TO: Prof. Crosley

FROM: Van Ha, Operational Analyst
DATE: MAY 20
SUBJECT: Walt Disney and its ways of making dreams come true
PESTEL
Since Walt Disney Company are broadly diversified, macro environment have impacted to it in many
aspects.
Political factors: Walt Disney Company has its resorts and parks operated in many big cities in the
world. Parks and resorts located in other countries all have to adapt to the countries political systems.
Economic conditions: Walt Disney products and services are considered as luxury. In the economy
down turn, the company may need to adjust its price to keep its customers. Moreover, economic
condition affects exchange rate and unemployment rate, which both effect Walt Disney parks and resorts
located in different countries.
Sociocultural forces: Changing in life style or social value will have impact on Disney products. For
example, with the globalization and the protests against racism, Walt Disney Company has created new
characters with more diverse backgrounds, including Pocahontas is native American, Tiana in princess
and frog is African American, and Mulan is from China. Moreover, with the shift of consumers toward
Internet, the company also needs to improve its website and online services.
Technological factors: Technology has a huge impact on Walt Disney since technological innovation is
one of the firm competitive advantages. Walt Disney movies have been known for good quality, the
company needs to continue developing its technology to keep its leadership in the market.
Environmental forces: Climate changes, or some factors like shortage of water can become obstacles
for the companys parks and resorts division.
Legal and regulatory factors: Walt Disney Company is relied on privacy and Intellectual Property
Protection Law to protect its well-known Disney characters, who are also its core competitive
advantages.
FINANCIAL RATIOS

Profitability
Liquidity
Leverage

2011
19.03
1.14
0.3

Gross Profit Margin

Current Ratio
Debt-to-Equity

2010
17.67
1.11
0.38

2009
15.76
1.33
0.35

Comparisons gross profit margins of the Walt Disney Company and its rival firms

Time Warner Inc

Nation Broadcasting Corp PLC
Walt Disney Company

2009
44.00%
31.40%
15.76%

2010
44.10%
37.80%
17.67%

2011
43.70%
39.90%
19.03%

TO: Prof. Crosley

FROM: Van Ha, Operational Analyst
DATE: MAY 20
SUBJECT: Walt Disney and its ways of making dreams come true

50.00%
45.00%
40.00%
35.00%

Time Warner Inc

30.00%
25.00%

Nation Broadcasting
Corp PLC

20.00%

Walt Disney Company

15.00%
10.00%
5.00%
0.00%
2009

2010

2011